Applying Mark Twain's famous dictum, "Buy land, they're not making it anymore", City bankers are queuing up to spend their bonuses on farmland – cashing in on rising prices, improving yields and significant tax breaks.

Estate agents report a significant increase in interest from City professionals chasing a dwindling supply of land coming to market.

"Farmland has always been an attractive investment but at the moment it seems to be the flavour of the month," said Alex Lawson, director of farms and estates at estate agent Savills. "The interest from the City has been very significant for the last five to 10 years but where in the past the main driver has been the ambition to have a country manor, we are now seeing much greater interest in the bare land without a property."

Lifestyle buyers are being replaced by investors attracted by high returns on land. Over the last 11 years, farmland prices have outperformed equities by a considerable margin. Figures compiled by estate agent Knight Frank suggest that while the FTSE 100 index is still below its level at the start of 2000, the index of farmland prices has almost trebled in value.

With growing concern about the security of food supply and the signs of an emerging global land grab, the attraction of farmland as an investment is clear. As the world population grows – and more acreage is devoted to crop for biofuel and to renewable energy projects such as photovoltaic plants and wind farms – so less land is available for food farming.

At the same time the strength of commodity prices has improved the historically low financial yield from investment in farming, which is providing a more stable underpinning for land prices.

"Commodity prices have done well," said Tom Raynham, an associate in farm and estate sales at Knight Frank. "With a long period of high prices then this ultimately flows through to the market."

He estimates that about a third of his clients are investors but notes that recent transactions have seen them in the majority.City bankers are well aware investment in farmland has considerable tax advantages. A farm's losses can be offset against their bonuses. There are also reliefs to shelter capital gains and, importantly, agricultural land is exempt from inheritance tax when simple conditions are met. With some land in the Cotswolds, a favourite retreat for the City, selling for £15,000 an acre, the IHT saving on a 1,000 acre farm at that price would be £6m.

City investors in farmland are supported by a growing number of contract farmers who will work but not own the land. One Gloucestershire farmer farms 2,500 acres but does not own any of it. Negotiating the terms of the contract could be enough to secure the IHT relief.

The rise in farmland prices coincides with an improving outlook for farm profitability with arable farmers in particular benefiting from the rise in commodity prices. Many farmers missed out on much of that rise last year because they sold around 40% of their wheat crop at forward prices, but one Cotswolds farmer is said to have made a clear cash profit of £500,000 from his 5,000 acre farm last year.